Market Summary

Yield Movements

Between 3 March and 30 May, local currency (LCY) government bond yields fell for all maturities, driven by weakening domestic growth outlook and rising global economic uncertainties. Bank Negara Malaysia hinted at a potential downward revision to the growth rate projections for Malaysia in 2025. Malaysia's year-on-year economic growth was slower in the first quarter of 2025 at 4.4%, compared to 4.9% in the prior quarter, due to moderating growth in private consumptions, exports, and imports. The central bank also reduced the statutory reserve requirement ratio from 2% to 1% to further spur financial activities.

Local Currency Bond Market Size and Issuance

The total LCY debt stock of Malaysia grew to MYR2.1 trillion on growth of 2.3% quarter-on-quarter (q-o-q) in the first quarter (Q1) of 2025, from 0.8% q-o-q in the previous quarter. The government bond segment rose 2.4% q-o-q (versus 0.6% q-o-q a quarter prior) on higher issuances during the period. The corporate bond segment expanded 2.0% q-o-q in Q1 2025 despite reduced issuance due to a lower volume of maturities during the quarter. Meanwhile, total LCY bond issuance increased 23.9% q-o-q to MYR99.6 billion in Q1 2025, buoyed by larger issuances of government bonds. Issuances of Treasuries rose 63.5% q-o-q due to increases in bond sales of both conventional bonds and sukuk.

Sustainable Bond Market

Malaysia's sustainable bond market tallied USD15.7 billion at the end of March on 1.9% q-o-q growth, with sustainability bonds making up 70.2% and green bonds 19.2% of the total. Corporate bonds dominate a majority (77.6%) of the sustainable bond market, 59.8% of which carried tenors of more than 5 years, resulting in a size-weighted average tenor of 8.6 years at the end of March.